INTRODUCTION

Medicare Advantage plans – the private health insurance plans funded under Medicare Part C to provide the same benefits as traditional Medicare – are making headlines.  While politicians debate whether these private plans are overpaid with Medicare and taxpayer dollars, newspaper stories report aggressive and improper sales tactics to encourage enrollment, and even fraudulent enrollment of beneficiaries into Medicare Advantage plans.  Plans are also engaged in a misleading informational campaign to protect the Medicare payments they receive.

Beneficiaries, their families, and their advocates should not be taken in by the Medicare Advantage hype.  Medicare Advantage plans do not serve a disproportionate number of low-income and minority beneficiaries.  Medicare Advantage plans are not always the best alternative for every Medicare beneficiary.

PRIVATE HEALTH INSURANCE PLANS DO NOT SERVE THE MAJORITY OF LOW-INCOME AND MINORITY BENEFICIARIES

As the Center for Medicare Advocacy reported in its March 29, 2007 Weekly Alert, the Medicare Payment Advisory Commission (MedPAC) continues to find that Medicare Advantage plans are overpaid an average of 12% as compared to the traditional Medicare program.  MedPAC recommended as recently as June 28, 2007, in testimony before the House of Representatives Budget Committee, that payments be reduced to save costs to the Medicare program.  The Congressional Budget Office also testified at the same hearing that Medicare Advantage plans are overpaid, and that lowering their payments would reduce Part B premiums and delay exhaustion of the Part A trust fund.[1]

To counter the reports about overpayment, the insurance industry has undertaken an aggressive and misleading campaign.  Their goal is to garner support for the unjustified payments from the most vulnerable beneficiaries and their advocates by claiming that a large number of Part C plan enrollees are beneficiaries with low-incomes and/or members of minority groups.  Insurance companies have contacted grass roots advocacy organizations in a number of states and asked them to contact their members of Congress about not cutting funding for Medicare Advantage plans.  They have provided form letters for beneficiaries to send to Congress asking that payments not be cut. Unfortunately, the allegations made by the insurance industry are simply not true.

The Center on Budget and Policy Priorities (CBPP), a non-profit, non-partisan research organization, issued reports debunking the statements by the insurance industry.[2] According to CBPP, Medicaid, and not Medicare Advantage, is the main form of coverage to supplement the traditional Medicare program for low-income and minority beneficiaries.  CBPP finds that 48% of Medicare beneficiaries with incomes below $10,000 also have Medicaid, as opposed to the 10% who are enrolled in Medicare Advantage plans.  Slightly more low-income Medicare beneficiaries have Medigap policies than are enrolled in Medicare Advantage plans.  More African American, Hispanic and Asian American beneficiaries receive Medicaid than are enrolled in a Medicare Advantage plan as well.  Beneficiaries with incomes below $20,000 are more likely to have other supplemental coverage than to enroll in a Medicare Advantage plan.

The insurance industry makes its claims about the reliance of low-income and minority beneficiaries on Medicare Advantage plans, CBPP explains, by distorting the data. They do not include Medicaid and retiree coverage as options that supplement Medicare when claiming that more low-income and minority beneficiaries choose Medicare Advantage plans than other supplemental coverage.  CBPP states, “Some 69 percent of Medicare minority beneficiaries with incomes below $10,000 are enrolled in Medicaid, while only 9 percent are enrolled in Medicare Advantage.  Minorities comprise as much as 45 percent of Medicare beneficiaries who also receive Medicaid.”

The significant impact of the continued overpayments of Medicare Advantage plans cannot be overstated.  Because Part B premiums reflect the cost of the Medicare program, all beneficiaries are forced to pay more for their Part B insurance when Medicare pays too much to Medicare Advantage plans.  Additionally, overpayments to Medicare Advantage plans threaten the financial security of the Medicare program.  As a result, Medicare beneficiaries may be faced with cuts in coverage or increased cost-sharing to sustain payments to the private insurance companies.

PRIVATE HEALTH INSURANCE PLANS MAY BE MORE COSTLY FOR LOW-INCOME BENEFICIARIES

The Centers for Medicare & Medicaid Services (CMS) issued a new memorandum that clarifies some of the questions about cost-sharing for people dually eligible for Medicare and Medicaid (dual eligibles) raised in the Center for Medicare Advocacy’s Weekly Alert of May 31, 2007,  Medicare Cost-Sharing in Medicare Advantage Plans:  Who Pays for Dual Eligibles?.  As the Center indicated, other than people eligible for the Qualified Medicare Beneficiary (QMB) program, a state has no obligations to pay for cost-sharing for dual eligibles who are enrolled in a Medicare Advantage plan.

According to the CMS memo, states have the option of paying Part C premiums for standard benefits for QMBs, including those who also have full Medicaid benefits.  According to CMS, states are not allowed to pay Part C premiums for all other categories of dual eligibles.  Thus, non-QMB dual eligibles will automatically be paying more simply by enrolling in Part C plans that charge premiums.  To complicate matters, states have the option of paying the Part C premium for supplemental Part C benefits for full-benefit dual eligibles, both those with and without QMB benefits.  In other words, states may pay those portions of the premium that may be attributable to optional benefits that may already be covered by their Medicaid programs.

Medicaid payment of deductibles and other cost-sharing is even more complicated.  The CMS memo indicates that states are required to pay cost-sharing for QMBs, both with and without full Medicaid benefits, and that payment is conditional for other full benefit dual eligibles.  The memo goes on to explain that in all situations states are not required to pay when the Medicare payment exceeds the Medicaid payment, so that in some instances Medicaid would pay nothing.  Further, states may only have to make payments on behalf of dual eligibles if the Medicare service is also a Medicaid-covered service, the provider is a Medicaid-covered provider, and the Medicaid payment exceeds the Medicare payment.

Thus, a dual eligible enrolled in a Part C plan that charges a premium and that has non-Medicaid providers in its network may have to pay the premium for the plan as well as the full cost-sharing for services provided by the non-Medicaid provider.

The CMS memoranda are available here.

PRIVATE HEALTH INSURANCE PLANS DO NOT NECESSARILY PROVIDE MORE BENEFITS AT REDUCED COSTS

CMS includes a page called “Medicare Basics” at the very front of the Medicare & You Handbook 2007 that is sent to all Medicare beneficiaries.  In describing the Original Medicare Plan (sic)[3], the Handbook says, “Your costs may be higher than in Medicare Advantage plans.” In describing Medicare Advantage plans, the Handbook says, “Your costs may be lower than in the Original Medicare Plan, and you may get extra benefits.”  These blanket statements are similar to the statements made by the private insurance plans to support their overpayments: the statements omit much of the information needed to assess the validity of the statements.

Reduced cost-sharing may be a myth for many beneficiaries: Marsha Gold, who has been studying private health plans since Congress established Medicare Part C, cautions, “Beneficiaries need to be aware that in some [Medicare Advantage] plans, cost sharing could be substantial if they are sick.  They must also understand that the absence of a network does not mean that they will not face other restrictions on access.”[4]  Gold particularly notes that in private fee-for-service plans, the fastest growing kind of private insurance plan, beneficiaries could incur a co-payment for each day of an inpatient stay.  She also points out that a flat $25 co-payment to see a specialty doctor may be more predictable than the 20% co-insurance in traditional Medicare, but it is not necessarily less costly.[5]

Private fee-for-service plans are not the only type of private health insurance plan that may impose cost-sharing in excess of that imposed by traditional Medicare. In its review of selected private plans across the country, the Center for Medicare Advocacy has found HMOs, PPOs and private fee-for-service plans that impose cost-sharing on inpatient stays from day one.  There are plans in many parts of the country that impose cost sharing of, for example, $295 per day for inpatient hospital stays (the Part A hospital deductible is $992 with no further cost-sharing for the first sixty days), or $150 per day for the first 10 days of a covered skilled nursing facility stay (Medicare imposes no cost-sharing for the first 20 days).  Some preferred provider organizations impose deductibles for out-of network doctor visits that exceed the $131 Medicare Part B deductible and/or impose a co-insurance of 30% instead of 20%. Many plans impose a co-pay for each home health visit or a co-insurance for non-network home health services, although traditional Medicare imposes no cost-sharing whatsoever. Some plans impose higher cost sharing for durable medical equipment and for cancer drugs than in traditional Medicare. And, many plans impose flat co-payments for doctor visits that may or may not be less than the 20% Part B co-insurance.

Additionally, Medicare Advantage plans can change their benefit packages and their cost-sharing on a yearly basis.  A private insurance plan that offers home health benefits with no co-payments in 2007 may add co-payments in 2008 without any input from its enrollees.  The traditional Medicare program could not make such a drastic change without an act of Congress.  The fact that Congress must approve changes to the structure of traditional Medicare adds to its stability, and means the benefit and cost-sharing structure will not change each year.

Extra benefits offered by private plans may provide little, if any, extra value.  The extra benefits available from many Medicare Advantage plans, while attractive to some beneficiaries, do not justify the extra payments. For example, plans that advertise an allotment towards eye care may pay $75 or $100 towards the cost of glasses every two years. They may pay $600 towards hearing aids, also every two years. Other plans offer health club membership or travel coverage not needed or used by many of their enrollees.  They may advertise Health and Wellness education without explaining whether the service includes more than a flyer about a particular health condition.

Dual eligibles, in particular, need to examine closely the extra benefits offered by a private insurance plan.  They may already be eligible for the extra services offered, such as dental and vision coverage, under their state Medicaid program.  If they enroll in a Medicare Advantage plan that offers such benefits, they would first have to use the benefits under the Medicare Advantage plan. If the Medicare Advantage plan provider is not also a Medicaid provider, Medicaid is not required to wrap around the Medicare benefits.  Such beneficiaries may find themselves in the situation of having to get part of their vision or dental care from their Medicare provider and then part of their care from their Medicaid provider.

CONCLUSION

Private health insurance plans offered under Medicare Part C, the Medicare Advantage program, may bring more aggravation than comfort to Medicare beneficiaries, particularly those with high health care needs and/or low-incomes. Beneficiaries, their families, and their advocates are encouraged to look carefully at such plans before enrollment to determine actual costs to them from the program, both now and in the future.  All taxpayers need to think carefully whether the current payments to such plans are justified, given their cost to the Medicare program and to beneficiaries who are most in need.

• June 2007 Memo

• May 2007 Cost Sharing Matrix